On June 26, 2017 a new Anti-Money Laundering Act (Geldwäschegesetz – hereinafter: “GWG”) entered into force in Germany, implementing the 4 th EU Anti-Money Laundering Directive No. 849/2015 of May 20, 2015 (the “Directive”). In general the new GWG reinforces the risk based approach. Of central importance of the new GWG is the establishment of the so called “Transparency Register” regarding ultimate beneficial owners of all non-listed legal entities.
Goal of the Transparency Register
The basic goal of the Transparency Register is to centrally store information about the beneficial owners of all entities and partnerships as well as of foundations and trusts to make such information accessible to governmental authorities, the people who need to perform customer due diligence and any other person who shows a legitimate interest in having such information.
To whom does the Compliance Requirement apply?
Any legal person organized under private law and any registered partnership in Germany must provide information to the register, including stock corporations, partnerships, limited liability companies (GmbH, UG), foundations and trusts managed by German trustees.
Beneficial Owner
Any beneficial owner of an entity has to be registered. A beneficial owner is any natural person who ultimately owns or controls the company.
With respect to companies or partnerships a beneficial owner is a natural person directly or indirectly holding 25 % or more of the voting rights and/or shares of capital in the legal entity or partnership or exercising control in a similar manner.
With respect to trusts and foundations or similar structures where assets are managed or distributed on a fiduciary basis, the beneficial owner is any natural person who acts as trustor, trustee or protector or any person who is a member of the management board of a foundation.
Information to be provided
In general, the name, date of birth, residence and type and scope of economic interest of the beneficial owner (like e.g. share capital, voting rights, voting agreements, position/function in the company) must be provided.
Exemption from the Compliance Requirement
For companies who are registered with the German commercial register the GWG provides two exceptions from the new reporting obligation. It will not apply to stock corporations whose shares are listed on an organized market. Furthermore the new reporting obligation does not apply to the extent the information that would be reported is already published in the commercial register or certain other public sources, like the partnership register or the register of cooperatives.
Non Reporting is a Misdemeanour
A violation of the reporting requirement is a misdemeanour and hence may be fined. The upper limit of administrative fines for violations of the anti-money laundering act has been increased form EUR 100,000 to EUR 1,000,000.
Access to the Transparency Register
In contrast to the commercial register, the transparency register will not be accessible to the general public. The register will be available to certain public authorities, like the competent authority, the criminal enforcement authorities and the federal central tax office and the local tax offices. In addition, businesses and individuals will be allowed access only to the extent necessary to comply with their due diligence obligation under the money laundering or if they show a legitimate interest. The legitimate interest is an uncertain legal term and has to be defined in every individual case.
Any access to the transparency register requires prior online registration so that the access can be monitored.
It is possible that the beneficial owner applies for a limitation or completed blocking of access by any interested party. In this request the beneficial owner has to show that his interests worthy of protection prevail over the interest of access to the register. This would be for e.g. the case if there are any facts which justify the assumption that the beneficiary owner could be a victim of crime, fraud, kidnapping etc.
Summary
The transparency register is on one hand certainly a burden for businesses and their owners because it creates additional reporting requirements which are fined when violated. On the other hand the register will it make easier for businesses to meet their compliance obligation and to obtain information about the beneficial owner of the business partners in the EU. However, it has to be emphasized that one cannot rely with good faith on the accuracy of the register in order to satisfy the compliance obligation. The reporting obligation to the transparency register enter into force on October 1, 2017.